Lawmakers are (finally) embracing financial literacy
While you might have been observing National Poetry Month, National Canine Fitness Month, or National Soft Pretzel Month, I’ve spent this April taking stock of state of financial education in the U.S. (Okay, I enjoyed a few pretzels, too.)
Financial Literacy Month is a time to reflect on how all Americans could be better served by personal finance education—particularly K-12 students. Back in the day, money management was a classroom staple; you’d learn how to balance a checkbook in math class, or about budgeting in your Home Economics class. (Remind me to tell you about the dashiki I made in Home Ec.) Sadly, teaching these important skills has gone largely out of vogue, with few states mandating substantive personal finance education as a high school graduation requirement. But I’m glad to say that this April, financial literacy advocates have reason to celebrate: Throughout the past year, lawmakers at both the state and federal level have pushed for financial education in schools.
The Youth Financial Literacy Act, which was introduced in the Senate in late 2018 by Sens. Doug Jones (D-Ala.), Maggie Hassan (D-N.H.), and Kirsten Gillibrand (D-N.Y.), would create a grant program to fund K-12 financial literacy programs, foster partnerships between financial literacy partner organizations and schools, and promote professional development to strengthen personal finance instruction. The draft legislation specifically touches on “personal credit, student loans, and financial aid” as key subjects that today’s students need to understand to master money management as adults.
“As we work to support job creation and expand economic opportunity for our young people, we also need to ensure that students are prepared to navigate their current and future finances, including student loan obligations,” Sen. Hassan noted in her statement introducing the bill.
Okay, but we all know how effective Congress has been at passing pretty much anything. Fortunately, multiple states have been moving forward with their own finlit agendas. According to the Council for Economic Education, 19 states now have personal finance requirements on the books as a high school graduation requirement, up from 13 in 2013 (back when I began serving on President Obama’s Advisory Council on Financial Capability for Young Americans) and from 17, where it had been stuck since 2014. By the time the CEE releases its biannual Survey of the States report in 2020, that count is poised to crack 20—at least. Arizona’s state senate passed a new law just this month mandating high schools to add personal finance to their economics curriculum, and as of this writing, similar bills are moving through state legislatures in California, Maine, North Carolina, and Rhode Island.
Critics often say that teaching money management concepts won’t move the needle on students’ personal finance outcomes, compared to other economic forces shaping their lives. Yet studies have found that, when taught effectively, high school financial literacy courses can have a real and lasting impact on the way students manage money in the real world. That means higher credit scores and lower levels of high-rate debt, including credit card debt and risky payday loans. Critically, the latest report from the Consumer Financial Protection Bureau notes that finlit courses also lead students to better decisions about college financing, like maximizing federal financial aid and grants and avoiding private loans.
The issue is that even after these courses are mandated, it’s all too likely that the burden of instruction will be foisted on unqualified or unprepared teachers; a recent Wall Street Journal article describes an Oklahoma high school where the teachers were sports coaches who just handed out worksheets: “Everyone treated it as a blowoff class,” said one student. Indeed, according to a 2016 PwC survey, only 31% of K-12 teachers said they would feel “completely comfortable” taking on a financial education class, if asked. This is why schools need all the support they can get, and why provisions like the Youth Financial Literacy Act’s professional development efforts are so important.
The great promise of this push for financial education is that it stands to have significant short and- long-term impacts on young people who are grappling with record student loan debt and a changing economy. The better prepared they are to make decisions at the onset of their adult financial lives, the healthier their finances will be as they get older. Financial literacy matters every month of the year, but I’m looking forward to checking in again next April to see how much farther we’ve come.